Gold firms as dollar loses ground

Bengaluru — Gold prices were supported by a weak dollar on Friday as markets awaited vital US jobs data that could affect the Federal Reserve’s latest hawkish stance on monetary policy.

Spot gold edged up 0.1% to $1,806.47/oz by 4.05am GMT. US gold futures were up 0.2% at $1,807.20/oz.

If the upcoming jobs report out of the US encourages the Fed’s hawkish mood, it should lead to a significant breakdown in gold, DailyFX currency strategist Ilya Spivak said.

Gold has gained about 0.8% so far this week as a pullback in the dollar lifted the appeal of the greenback-denominated bullion. Despite a rebound in a lot of Fed-affected assets that weakened because of its hawkish stance and the dollar pulling back, gold has not been able to mount a rally, which indicates significant underlying weakness, Spivak said.

Gold prices have more or less consolidated around the $1,800/oz level since slipping to a 1½-month low last week after the Fed signalled a March interest rate hike to fight inflationary risks. Gold is considered a hedge against inflation and geopolitical risks, but interest rate hikes would raise the opportunity cost of holding non-yielding bullion.

Lingering concerns over Russia’s invasion of Ukraine have also kept demand for the safe-haven metal intact.

“Signs of more sustained inflation, due to continued supply chain issues, higher commodity prices, or continued upside pressure on wages, could also act as a tailwind for gold this year,” according to Jordan Eliseo, manager of listed products and investment research at Australia's Perth Mint. Eliseo highlighted that it is possible that the challenge higher rates pose to equity markets could end up supporting gold.

Among other metals, spot silver added 0.4% to $22.48/oz, platinum inched up 0.1% to $1,033.89/oz and palladium rose 0.5% to $2,336.65/oz.

Reuters